Examination of Witnesses(Questions 100-114)|
MICHAEL CBE, MR
CB, MS JACKIE
TUESDAY 14 JANUARY 2003
100. If an employer transfers a debt to the
employee which is about to be paid to the employer, the value
of that debt is not high but when it is paid , if it is paid in
the full value, its value is higher.
(Mrs Scott) Yes.
101. If a manufacturer of chocolate bars paid
in chocolate bars, it would cost the employer much less than the
employee could sell it for. You tax it on the basis of what the
employee could sell it for. That is still treated separately from
benefit in kind?
(Mrs Scott) Yes.
Lord Goodhart: The gold bars and payment in
commodities was used in recent years to avoid national insurance
102. This is outside your remit but national
insurance views are not yet drafted in plain English. Is there
any prospect of this moving across and getting rid of these problems
whereby you can pay people with various commodities and avoid
(Mrs Scott) I think it has been fixed. I do not know
Dawn Primarolo: It is not quite fixed.
103. Every time Parliament has legislated to
cover some bizarre new commodity being used for payment, people
have thought of another bizarre commodity which they could start
paying out and which avoided national insurance. They are still
playing that game of catch-up, are they?
(Mrs Scott) They are still playing games, I understand.
Chairman: The definition of liability for national
insurance earnings for the purposes of national insurance is still
drafted in quite different language to the language you are now
using in income tax.
Dawn Primarolo: Because Parliament itself holds
the route for how national insurance legislation is processed.
It is administered through the Inland Revenue. The parliamentary
process has to be reformed itself to allow a course of alignment,
so there has been alignment where possible. It is never perfect
because there is always creativity in what the new mechanisms
might be and complete alignment is a huge policy issue about flags
in the national insurance system on entitlement. The Finance Bill
cannot legislate for national insurance without a fundamental
Baroness Cohen of Pimlico
104. The rules are inconsistent because you
do not pay national insurance on health insurance or cars, although
they are treated as benefits in kind over the year. There are
artificially assigned amounts.
(Mrs Scott) I fear that we are getting slightly outside
our scope of expertise, but there are class 1A benefits under
the national insurance system which apply in respect of car benefits.
Chairman: Attempts are constantly made to get
them closer to each other. My examples are not totally irrelevant.
There was a brief time when people were paying the earnings of
some of their senior employees in debts like gold or silver, not
seeking to evade income tax, but they avoided all the national
insurance liability until that was dealt with. We talk about the
rewriting of the tax laws. Given that we have got rid of the Contributions
Agency, a step of which I wholly approve, and given that what
we are actually talking about is people's liability to make their
contribution on whatever they earn, there is a case for making
sure it is all drafted in the same sort of language and it can
then be read across more easily.
Lord Howe of Aberavon: We can give thanks for
the fact that we are not also grappling with the details of prices
and income support.
105. Can I go to an area which has been around
a long time, which is people being paid in non-cash vouchers?
Clause 84 of the Bill, page 42, deals with this matter. I would
be interested if you could give us a commentary on the before
and after effects of what you have done. How far back does the
tax law dealt with by clause 84 go and, given that there have
been all kinds of attempts in the past not just in the 20th but
the 19th and the 18th centuries to pay people without paying them
cash, how far back does the tax law go on this and how far do
you go in ensuring that you replicate in today's language and
terminology some of these effects of history in this part of tax
(Mrs Sampson) When we did the analysis, we went back
to the original drafting papers if we could not work out what
was meant by the statute as it was and looked at the correspondence
between the drafters and the instructor to find out what they
were trying to do. We built on that to come back to something
that we could put in clearer language, to break it down into the
clauses we have here, compared to the very dense sections 141,
142 and 143.
106. There were three different sections of
the existing tax law which constituted what is now clause 84 of
(Mrs Sampson) No. The non-cash vouchers come under
section 141 of ICTA. It was the analysis of all that plus drawing
on some of the general rules that come within section 144 which
we wrote back into here to try to make it clearer.
107. You have alerted us to an interesting piece
of methodology which you have used. Has that been in general the
way that you have approached not just this particular clause but
other parts of the Bill to ensure the line of purity of thought
in terms of ensuring that what we see before us today is what
Parliament meant in terms of the original wording of the original
legislation from which this Bill has now been drawn?
(Mrs Scott) In every provision that we rewrite, we
go back to look at the notes on clauses when the provision was
introduced. We will often look at drafting papers. They are not
always available. If you are looking at provisions first introduced
in the early part of the century, you stand precious little chance
of getting hold of the drafting papers. Notes on clauses are generally
available. We look at all the manuals and publications by our
specialists. We look at outside commentators' views of the law
and all the relevant tax cases. We bear them all in mind in weaving
together the various concepts that form the clauses in this Bill.
It is not necessarily true to say that we will always deliver
the original parliamentary intention. If there has subsequently
been a court case that establishes that the provision in ICTA
does not do what government thought it did when it was being introduced,
we cannot change the law to put it back to what government originally
intended. That would require a Finance Bill change.
108. If the court has changed the way people
thought the law was working, are those changes now incorporated
in this Bill?
(Mrs Scott) Yes, where it is a settled court decision.
When something has appeared in the High Court last month or in
the early part of this year, no, but we are not aware that there
are any cases where there is currently a dispute.
109. By and large, those court cases would have
affected the mechanism but not the purpose of the original legislation.
Would that be right?
(Mrs Scott) The original purpose of the legislation
may well have been to give a deduction in particular circumstances
and the legislation may have been drafted in such a way that the
scope of the circumstances in which the deduction is available
110. Users of the old tax legislation which
this replaces would have to have had the original Act together
with their knowledge of the court cases and an accountant advising
a client would have said, "This is what the Act says, but
so and so has now changed it." You have brought this together
so that people can chuck out their court cases because it is all
in the Bill.
(Mrs Scott) I would not recommend that people chuck
out their court cases. There is a lot of useful dicta in court
Mr Jack: In terms of real world use, this Bill
reflects court judgments which have changed tax law. In other
words, it has incorporated the modifications by the courts in
this Bill so that, if this Committee were to recommend to the
House approval of this, we have incorporated a court change into
111. I think what you are asking is this: you
have not taken the opportunity anywhere of reversing a court decision
in order to draft the law in a way that overturns the decision.
(Mrs Scott) No.
Chairman: The only other subject we have not
touched on is the drafting. We have been provided in the memorandum
of evidence with some before and after examples. In my opinion,
the Committee is debating drafting but it is essentially a written
exercise and it is a question of the Committee having a look at
the examples of before and after and then raise any comments if
they are dissatisfied or wish to comment about the way in which
it has been done. Can I ask whether anybody will be getting onto
the drafting or whether, having studied and taken note of appendix
five, we are content, this being the second Bill of its kind,
that the exercise of turning it into plain English remains very
valuable? There is a prospect that, this afternoon, we could turn
to the government amendments. Mr Jack, what is your view on how
we handle our general appraisal of rewriting in plain English?
112. You have made particular reference in our
deliberations this morning to getting rid of old language and
yet on appendix five I notice the word "spouse". Given
that we are into the world of partners, wives and various other
modern phrases to determine the arrangements between persons being
together in whatever way they choose, I wondered why "spouse",
which is quite an old word, survives.
(Mrs Scott) It is in the interest of general, neutral
drafting that you do not refer to "husband" or "wife".
If the source legislation refers to "husband" or "wife",
it would be a change beyond our remit to extend it to cohabiting
Chairman: A spouse is someone you are married
to and a partner is someone that you are not necessarily married
Mr Jack: You trespass into difficult waters
because you use the word "married".
Chairman: This is not the occasion for a radical
Mr Jack: I appreciate that.
113. Can I therefore conclude by asking whether
it might be possible this afternoon for the Minister and the team
to produce the annotated version of the amendments which you referred
to? Then we can start looking at the amendments. I apologise for
having given no more opportunities for private and deliberative
sessions this morning. My suggestion is let us finish the evidence
and turn to the amendments and wind up with one deliberative session
on the whole thing before deciding what we report back to the
House. If that meets general consent, I think the Committee should
now rise and, if it is physically possible to get the notes to
us this afternoon or put them on the board beforehand so that
people have a chance to read them, I would be very grateful, although
it means somebody working through their lunch hour.
(Mr Michael) The people who will be writing the notes
are the people who have been appearing before you this morning,
but perhaps we can get something by 3.30.
Chairman: If it is possible to finish it before
4.30, in both Houses there is a letter board system so Members
of the Committee can look from three o'clock onwards to see if
there is something on the board. If it is not possible, we will
have somewhat fuller proceedings this afternoon. If any Member
of the Committee wishes to table an amendment, their last opportunity
is between now and this afternoon. If none turns up, I shall take
it that nobody is proposing any amendments.
114. Would the officials group how they do the
amendments into one set which is purely corrections and technical
points and concentrate on explaining to the Committee the issue
where there was an inadvertent extension? That would be helpful.
(Mr Michael) We will do that.